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PUB to take over Tuaspring plant if Hyflux cannot fix defaults by April 5

PC Lee

SINGAPORE (Mar 22): PUB says it will terminate the water purchase agreement with Hyflux subsidiary Tuaspring Pte Ltd (TPL) if the water treatment firm is not able to fix its defaults by April 5.

In addition, PUB says it will also start the process of taking over its Tuaspring desalination plant, given it has the operational capabilities, experience and manpower to run the plant.

"PUB’s role is to safeguard Singapore’s water security. Singapore’s desalination plants are integral to our water security," says the republic’s national water agency in a Thursday press release.

Earlier this month, PUB said Tuaspring had failed to keep the plant reliably operational as required under the water purchase agreement signed with PUB in 2011.

Under the water purchase agreement, Tuaspring has to deliver up to 70 million gallons of desalinated water per day to PUB for a 25-year period from 2013 to 2038.

In addition, the purchase price for the Tuaspring desalination plant will be determined by an independent valuer.

Given the current valuation of the purchase price of the desalination plant is negative, there is a likelihood that TPL will have to pay PUB a compensation sum if PUB bought only the desalination plant.

In a media release however, PUB says it is willing to waive any compensation it could have claimed from Hyflux and purchase only the desalination plant at zero dollars.

PUB's Thursday response was made after Tuaspring sought clarification on Wednesday, asking if PUB will purchase the entire Tuaspring integrated water and power project, or only the desalination plant.

Separately, PUB notes that SM Investments has issued a notice to remedy to Hyflux, stating PUB's default notice as an event that TPL will need to cure within two weeks under the restructuring agreement between Hyflux and SM Investments. If not, SM Investments may assert its rights to terminate the restructuring agreement.

Last Oct, SM Investments -- a consortium between Indonesia’s Salim and Medco groups -- came to Hyflux’s rescue by offering $400 million in exchange for a 60% stake once it has settled all its debts. The consortium is also granting Hyflux a shareholder's loan of a principal amount of $130 million, as well as a $30 million loan to help finance it through the restructuring.